Mirant debt gains slightly; Loral Space flying despite Chapter 11 filing; AMR narrows loss

By Carlise Newman

Chicago, July 16 - News of Mirant Corp.'s bankruptcy continued to dominate distressed debt trading Wednesday. The company said late Monday that it had filed for Chapter 11 protection due to inability to agree with its bank lenders on a restructuring plan.

On Tuesday, the Mirant Americas Generation notes rose on the news and the parent company bonds fell, leaving many traders scratching their heads.

"Most of the assets are with MAG," one said. "But it was just a mess yesterday. They were everywhere, although the parent company really bombed. Today the bonds were better overall and trading more in line with each other."

At the end of trading Wednesday, Mirant Americas' 7 5/8% notes due 2006 were trading at 74 bid, about two points higher than Tuesday. Mirant Corp.'s 7.9% notes due 2009 and 7.4% notes due 2004 were seen at 42 bid, up from 40 bid, 41 offered Tuesday.

Mirant filed in the U.S. Bankruptcy Court for the Northern District of Texas, Fort Worth Division. In addition, the company has obtained a commitment, subject to court approval, for $500 million in debtor-in-possession financing.

Along with its Chapter 11 filing, the Atlanta-based energy company terminated its offers to exchange its 2.5% convertible debentures due 2021 and its 7.4% senior notes due 2004. Mirant Americas Generation, LLC also terminated its offer to exchange its 7.625% senior notes due 2006.

News of another bankruptcy, that of Loral Space & Communications Ltd., was also still pushing the company's bonds. Loral's guaranteed 10% notes due 2006 were seen at 63 bid, up 5½ points, while its 9.5% notes due 2006 were quoted at 28 bid, 30 offered, a rise of three points, a trader said.

"Loral was going nuts today," the trader added.

Loral filed for Chapter 11 as part of an agreement to sell its six North American telecommunications satellites to Intelsat Ltd. for $1.1 billion in cash.

The Chapter 11 filing will enable Loral, a satellite company in New York, to sell the six North American satellites "free and clear of any encumbrances" according to the release.

Intelsat has agreed to order a new satellite from Loral and will make a $100 million down payment on that order upon closing of the sale of the North American satellites.

American Airlines' parent company AMR Corp. narrowed its second quarter loss to $75 million with help from war-related federal aid. The carrier also announced Wednesday that it would cut over 2,000 jobs at its St. Louis hub.

AMR's 9% notes due 2012 were up a point and a half at 71½ bid, 73½ offered, a trader said.

"The gains were limited because they announced the job cuts the same day as the financial news," he said. "This is the first good news to come out of them in a while."

The AMR loss was $75 million ($0.47 per share) and compared to a loss of $495 million ($3.19 per share), in the same quarter a year ago. Excluding special items, which included $358 million in emergency aid, primarily in the form of airport-security cost reimbursements, AMR said it lost $357 million ($2.26 a share) in the April-June quarter.

Revenue for the quarter for the Fort Worth-based airline carrier was $4.32 billion, a drop of 4% from $4.50 billion in the same period a year ago.

AMR also said Wednesday it will close its reservations office in St. Louis on Sept. 15 and reduce the number of daily departures at Lambert Airport to 207 from 417, beginning Nov. 1.

In addition, news reports noted that chief executive Gerard Arpey, during the conference call to discuss the earnings, said the company is no longer discussing bankruptcy .

Meanwhile, Conseco Inc.'s debt traded higher Wednesday. Conseco's unextended bonds were "up a little," to 38½ bid, 39 offered, a trader said.

On Wednesday Conseco filed its fourth amended plan of reorganization with the bankruptcy court. The new amendments reflect minor modifications to the non-debtor release provision and related components of the plan.

Elsewhere, two companies were moving but traders contacted by Prospect News did not know why. They were Adelphia Communications Corp. subsidiary Arahova Communications. Its 8 7/8% notes due 2007 were "up 3 or 4 points" to 74 bid, a trader said.

In addition, Doman Industries "has been lower over past week, down a little more." Its 8¾% notes due 2004 and its 9¼% notes due 2007 were both quoted at 19½ bid.

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